BILL ANALYSIS
SB 565
Page 1
Date of Hearing: July 13, 1999
ASSEMBLY COMMITTEE ON CONSUMER PROTECTION, GOVERNMENTAL
EFFICIENCY, AND ECONOMIC DEVELOPMENT
Susan Davis, Chair
SB 565 (Costa) - As Amended: June 1, 1999
SENATE VOTE : 33-2
SUBJECT : State facilities: Department of Transportation: study
SUMMARY : Requires the director of the Department of General
Services (DGS) to study the purchase, exchange, or acquisition
of real property and the construction of facilities in the
County of Fresno for the Department of Transportation and other
state agencies. Specifically, this bill :
1)Requires DGS to study the options of a lease-purchase or a
lease with an option to purchase the facilities.
2)Requires DGS to consider placing the facility on a site that
permits future expansion of the facility if evaluations of
future workload indicate that future expansion of the facility
may be warranted.
3)Requires the study to assume that the cost of purchasing and
operating these facilities may not exceed the cost of leasing
and operating an equivalent amount of comparable office space
over the same time period.
4)Requires the director of DGS to submit the study to the
Legislature by December 31, 2000.
5)Sunsets January 1, 2001.
EXISTING LAW authorizes the director of DGS to hire, lease,
lease-purchase, or lease with the option to purchase any real or
personal property for the use of any state agency, if the
director deems the hiring or leasing is in the best interest of
the state.
FISCAL EFFECT : Unknown. This is a fiscal bill.
COMMENTS :
SB 565
Page 2
1)Author's Intent
According to the author, this bill is part of an effort to
bring activity back to downtown Fresno while simultaneously
assisting Caltrans in improving its internal efficiencies.
This bill would provide DGS with the necessary authority to
proceed with the consolidation of state agencies in the County
of Fresno. The author would like the state to build a new
multi-tenant state building in the downtown core to help
revitalize Fresno's central business district.
The author believes that the economic criteria that DGS has
used to justify new multi-million dollar state office projects
in major metropolitan areas may not be feasible for
"secondary" metropolitan areas. The Legislature and the
Administration may need to develop alternative justification
criteria to address future state office needs in smaller
cities.
2)Background
Justification for new state projects in major metropolitan
areas (e.g., the new multi-tenant and headquarters office
consolidation projects in Los Angeles, San Francisco,
Sacramento, San Diego and Oakland) has focused on the economic
benefits of ownership compared to the avoided cost of leasing.
The enabling legislation for these new projects has generally
stipulated that the state's development must show a cost
savings when compared to the avoided cost of leasing a similar
quantity of leased space over the term of the project
financing.
DGS owns multi-tenant state office buildings in Redding, Red
Bluff, Stockton and Fresno that are approximately 30 plus
years of age. According to DGS, state tenants in these
buildings are paying lease rates that are considerably more
than privately own leased space in these communities. Not
only are the rents higher in the state office buildings, but
the conditions of older state-owned facilities are generally
less desirable than those in the newer, privately owned
facilities. DGS contends that it is unlikely that a new
multi-tenant office building project financed with debt will
ever compare favorably to market rents for leased space in
most secondary metropolitan areas.
SB 565
Page 3
3)Related Legislation
SB 1093 (Johnston), 1999: Would authorize DGS to enter into
an agreement to purchase $24 million of office space for the
Teale Data Center in the County of Sacramento (pending in the
Assembly Appropriations Committee).
SB 1934 (Johnston), Chapter 782, Statutes of 1998: Authorized
DGS to purchase property and construct state-owned office
building and parking facilities, within Sacramento or the City
of West Sacramento, for use by the State Department of
Corrections and other state agencies.
SB 1270 (Johnston), Chapter 721, Statutes of 1997: Authorized
construction of the East End Office Complex near the state
capitol to accommodate the consolidated housing of the State
Department of Health Services (DHS), State Department of
Education and DGS.
AB 3280 (Cunneen), Chapter 1032, Statutes of 1996: Authorized
DGS to exercise and existing purchase option and acquire the
Health and Welfare Agency Data Center building in the City of
Sacramento for $24 million.
SB 1277 (Killea), Chapter 568, Statutes of 1995: Granted DGS
the authority to proceed with the consolidation of an existing
state-owned downtown building and three suburban service
centers in San Diego.
SB 565 (Johnston), 1995-96 Session: Would have granted DGS
the authority to proceed with Phase III of the Franchise Tax
Board's central office project (held in the Assembly Revenue
and Taxation Committee).
AB 1771 (Bowler), 1995-96 Session: Would have granted DGS the
authority to purchase certain property in Sacramento County
for the Teale Data Center (failed passage in Assembly
Appropriations Committee).
AB 360 (Karnette), Chapter 659, Statutes of 1994: Granted DGS
the authority to proceed with the consolidation of state-owned
or leased facilities in Long Beach.
SB 1410 (Rogers), 1993-94 Session: Would have authorized DGS
to consolidate Caltrans facilities in the County of Inyo
SB 565
Page 4
(failed passage in Assembly Transportation Committee).
SB 1926 (Johnston), 1993-94 Session: Would have granted DGS
authority to consolidate DHS facilities in the Sacramento
region (placed on Senate Inactive File at author's request).
SB 772 (Petris), Chapter 430, Statutes of 1993: Authorized
DGS to trade an existing state building for a new site and
authorized construction of a new state-owned office building
next to City Hall in Oakland. Also, granted DGS authority to
consolidate Caltrans offices in the City of San Bernardino.
AB 896 (W. Brown), Chapter 429, Statutes of 1993: Authorized
DGS to consolidate state offices scattered over three counties
into two buildings in downtown San Francisco.
REGISTERED SUPPORT / OPPOSITION :
Support
None on file
Opposition
None on file
Analysis Prepared by : Betsy Austin / C.P., G.E. & E.D. / (916)
319-2076